Atlantic Canadians have a declining share of Canada’s growing wealth, owning only 4.9% of the country’s total household wealth—down from 5.4% in 1999—even though they make up 7.4% of Canada’s households. Within the region, the richest 10% of Atlantic households own about half the region’s wealth while the poorest 40% together own only 3.6%.

These are some of the conclusions of a new report on financial security released today by GPI Atlantic, the Nova Scotia based non-profit research group that is constructing new measures of progress for the province. The GPI study analysed data sets on household finances—including some previously unpublished—from Statistics Canada’s Surveys of Financial Security and other sources.

The 143-page report finds that households in Atlantic Canada experienced the fastest rise in debt in Canada during the six-year period between 1999 and 2005. Atlantic households also saw a larger gap between debt growth (62%) and asset growth (35%) than in any other regions, contributing to its declining share of national wealth.

“Even though the gap between the rich and poor provinces has grown,” says Kimberley Tran, co-author of the GPI report, “that doesn’t mean there isn’t still plenty of wealth in Atlantic Canada. The distribution of that wealth is just very uneven.”

Tran notes that Atlantic Canada has at least 11,000 millionaire households and even its share of billionaires—including the Irvings, the Sobeys, and Harrison McCain.

But about 77,000 Atlantic households are so seriously in debt that they wouldn’t be able to pay off their debts even if they sold everything they owned, including their homes. “Tens of thousands of Atlantic Canadians are suffering from severe financial stress,” says Tran, “they don’t have assets to draw on to weather unexpected crises like job loss, sickness, or loss of an earning partner; and they can’t deal with unforeseen and sudden cash requirements for home repairs, car repairs, medications or other needs that demand urgent attention.”

The GPI report notes that the growing wealth gap is Canada-wide. Millions of Canadians are suffering from increasingly severe financial insecurity and distress during a period of apparent prosperity in which total household wealth more than tripled in the last two decades and the gains of the rich have mushroomed.

Since 1999, Canada’s wealth gap has widened, with the richest 20% of households now owning nearly 70% of the country’s wealth while the poorest 40% own just over 2%, and the bottom 60% have only 10.7%-—down from 11.4% in 1999. The richest 5% of Canadians own about 45% of the country’s wealth and the richest 1% own about 25%.

Since 1999, the richest 20% of Canadian households saw their wealth increase by 43% in real terms to $3.37 trillion in 2005 while the poorest 20% went deeper into debt, with the magnitude of their negative wealth (excess of debts over assets) growing by more than 70% in real terms to $6.4 billion in 2005.

The GPI report found that poorer households are increasingly relying on high cost debt sources, like credit cards and payday loans, just to make ends meet but that plunge them even deeper into debt. By contrast, wealthier households have the equity and financial means to access low-interest credit, which they can leverage to build assets and increase their wealth.

Tran notes that, while credit sources like lines of credits have generally reduced borrowing costs and become more widely accessible, they require existing equity and may thus work to increase rather than narrow the wealth gap. Over 71% of line of credit debt is held by the wealthiest 40% of households, while less than 11% is held by the poorest 40%. .

Those in the middle saw their wealth grow, largely because the value of their homes increased sharply in the last decade. Unlike the wealthiest 20%, which has more of its assets in stocks, bonds, mutual funds, RRSPs, and other financial investments, homes make up 55% of the assets of the middle 20% of Canadian households, and mortgage debt accounts for three-quarters of their total debt..

But the GPI report notes that homes are not easily sacrificed or converted to cash at a time of financial crisis. When home values are subtracted, the remaining wealth of those in the middle actually fell by 7% between 1999 and 2005—indicating that financial security of middle wealth households are tenuous when liquidity is taken into account. Relative to wealthier households, the middle 20% of households also held a smaller portion of the nation’s overall wealth in 2005 (8.4%) than in 1999 (8.8%).

Tran says the evidence points to the need for governments to pay greater attention to equity issues, to policies that enhance job and income security, ameliorate student debt loads, and strengthen the social safety net, and to programs that assist households to better manage their finances. “The evidence shows that financial security contributes far more to wellbeing than ever higher levels of spending and consumption, particularly when a growing portion of that spending is financed by debt.”

The full GPI Debt and Financial Security report released today can be accessed here.

This report examines trends in household wealth since the 1980s—in Canada as a whole and in the Atlantic region. In particular it looks at trends in wealth distribution, including Atlantic Canada’s share of national wealth and in the portion of wealth owned by the top, middle and lower wealth groups.

The report examines financial security and trends in total household debt, and assesses how many Atlantic Canadians are so seriously in debt that they could not pay off their debts even if they sold everything they owned, including their homes. It undertakes a detailed examination of household borrowing patterns and of the different kinds of debt, including mortgages, student loans, vehicle loans, lines of credit, credit card debt, and payday loans, and looks at their implications for financial security. The report also includes additional sections on trends in bankruptcies and government debt.

Financial security is a key measure of progress and wellbeing in the Genuine Progress Index (GPI) because adequate wealth enables households to weather the unexpected financial crises that can result from job loss, sickness, or loss of an income-earning partner. They can also provide a reserve for house or car repairs that are suddenly required, or for other unanticipated financial outlays that would strain normal income.

Conversely, financial insecurity can seriously compromise wellbeing and cause a range of other problems including stress, anxiety, illness, and (in extreme cases) even crime and suicide. As well, sharp wealth and income inequalities can threaten social stability and cohesion, and undermine productivity and health. For these reasons, financial security is one of the 20 core components of the Nova Scotia GPI.